Dive Brief:
- Portland, Oregon, is the first U.S. city to tax a publicly held company whose chief earns 100 times more than the median earnings for employees, reports Fast Company. Portland’s Revenue Bureau identified 500 publicly held corporations doing business within the city, including Wells Fargo and Walmart.
- The Portland City Council passed a measure that requires companies to pay a 10% surtax in addition to the city’s 2.2% adjusted net income tax if there’s a pay gap. CEOs who make 250 times more than their workers must pay an additional 25%.
- Portland’s decision to tax CEOs’ pay coincides with the new Security Exchange Commission’s disclosure and reporting rules, which, under the 2010 Dodd-Frank law, require CEO-to-employee pay ratios to be published. The requirements begin in January 2017.
Dive Insight
Proponents of Portland’s ordinance view the tax as a means of addressing income inequality. Its opponents, largely from the business community, don’t believe the tax is necessary or will affect the income inequality crisis. However, Portland will use the proceeds towards funding a project to support the homeless.
Companies have little control over CEO salaries, bonuses, stock options and other perquisites, which are typically approved by corporate boards. But employers can review pay practices, pay levels and employees’ education and other qualifications to comply with the Equal Pay Act and avoid costly discrimination claims.
